Kepple v. Fairman Drilling Co.

• Decision Date: 29 December 1988
• Citation: 380 Pa.Super. 52,551 A.2d 226
• Parties: Glenn C. KEPPLE and Nora G. Kepple, his Wife, Appellants, v. FAIRMAN DRILLING COMPANY, a Partnership.
• Court: Pennsylvania Superior Court

Page 226

551 A.2d 226

380 Pa.Super. 52

Glenn C. KEPPLE and Nora G. Kepple, his Wife, Appellants, v. FAIRMAN DRILLING COMPANY, a Partnership.

Superior Court of Pennsylvania.

Argued Sept. 1, 1988.

Filed Nov. 2, 1988.

Reargument Denied Dec. 29, 1988.

Anthony W. DeBernardo, Jr., Greensburg, for appellee.

Before CIRILLO, President Judge, and TAMILIA and HESTER, JJ.

CIRILLO, President Judge.

This is an appeal from a judgment entered by the Court of Common Pleas of Westmoreland County in favor of appellee Fairman Drilling Company and against the appellants, Glenn C. and Nora G. Kepple, and from an order requiring an audit and accounting of royalties owed by Fairman Drilling Company to the Kepples and others.

The appellants, the Kepples, leased gas and oil rights which they believed to be attached to twenty five acres owned by them to Fairman Drilling Company in August of 1978. They had acquired the property from Cecelia and Florence Burkley in 1971, subject to "conveyances of mineral rights as set forth in prior instruments of record or apparent on the ground." The Kepples were unaware of the fact ¹ that the mineral rights to the Burkley land, including the parcel which they had purchased, were subject to a previous lease held by Peoples Natural Gas Company [Peoples Natural Gas] entered into by the Burkleys in May of 1957. The lease was to run for ten years, but included a provision which stated that it would continue in effect after that ten year period for as long as that land, or any portion of it, or any other land with which it had been pooled or unitized, was being explored for gas or oil by Peoples Natural Gas, was being used to hold gas or oil in storage, or was being used to produce gas or oil by that company. In 1964, the Burkley property was unitized with another tract of land owned by Rose E. White where a deep gas well had been drilled [the White well]. A shallow gas well [the Burkley well] was later drilled in 1978 on the remaining Burkley property after a series of conveyances which included the conveyance to the Kepples.

Fairman entered onto the Kepple property, and began operations. At this point, Peoples Natural Gas informed Fairman that it, in fact, held the interest in the oil and gas rights to the Kepple property. The two companies then negotiated a "farm out" agreement, which permitted Fairman to drill two shallow gas wells on the Kepple property, and provided that Peoples Natural Gas would buy the gas produced by those wells.

Peoples Natural Gas then wrote to the Kepples and informed them that it was in possession of a title report which indicated that the Kepples possessed a twenty-five percent interest in the lease of the mineral rights from the Burkleys to Peoples Natural Gas. It stated that it would pay the Kepples proportionate royalties from the Burkley well and from the White well. The company indicated that the proportion of the royalty owing to the Kepples from shallow wells amounted to 41.7585% (this included the Burkley well), while the proportion of the royalty from deep wells (in this case, the White well was the only deep well) was 6.8776%. Peoples Natural Gas also informed Fairman that the Kepples were to receive 41.7585% of the royalty from any shallow wells. Fairman has consistently paid into an escrow account 41.7585% of the total royalties from the two shallow wells it has drilled. The total royalty from those two wells purportedly equals one-eighth of the value of the gas extracted from those wells.

Two lawsuits were filed, one in equity by Robert Bricmont, seeking an accounting and a determination of the royalties owed to the Burkley assignees, ² and one in assumpsit by the Kepples, claiming that they were owed the full one-eighth royalty for all gas removed from their property. These suits were consolidated and heard before the Honorable Charles H. Loughran, sitting without a jury. The judge made extensive findings of fact, and held that Fairman owed a proportionate amount of the royalty from the wells on the Kepple property to various persons, including the Burkley assignees, and that the Kepples were not entitled to the full one-eighth royalty from those wells. The judge then ordered an audit and an accounting to determine the proper payments to each party.

The Kepples filed a motion for post-trial relief requesting that the order of the court be reversed, consolidated with exceptions to the trial court's findings of fact. The motion and exceptions were denied. After judgment was entered on the verdict in the assumpsit claim, the Kepples appealed to this court.

The Kepples claim on appeal that they were denied due process of law and that the trial court abused its discretion in failing to include in its findings of fact relevant and material evidence. They also argue that the trial court erred in holding that Fairman was not estopped from denying that the lease from the Kepples to Fairman purportedly conveying an interest in oil and gas rights was a valid lease. Lastly, the Kepples complain that the trial court erred in relying on the proportionate reduction clause and the warranty clause in its determination that the doctrine of estoppel was inapplicable. Because we find that there is no merit to any of the arguments raised by the Kepples, we affirm the orders of the trial court.

The Kepples argue that the trial court failed to include findings of fact suggested by them which they insist would go to prove their claim of estoppel. They argue that Fairman, as their tenant, could not question their title, as his landlords, in the oil and gas rights appurtenant to their property. Because the court failed to include in its findings any fact which would go to the estoppel issue, the Kepples insist that they were denied due process of law and a fair trial. They complain that "[h]alf of the evidence presented was not reduced to findings of fact nor considered by the trial court." For this reason, according to the Kepples, the findings of fact are not supported by the evidence.

The findings of fact of a trial court sitting without a jury are accorded the same weight and effect on appeal as the verdict of a jury. Those findings will not be disturbed on appeal unless they are unsupported by competent evidence, or are predicated on an error of law. Cover v. Cushing Capital Corp., 344 Pa.Super. 593, 598, 497 A.2d 249, 252 (1985); Piccinini v. Teachers Protective Mutual Life Insurance Co., 316 Pa.Super. 519, 524, 463 A.2d 1017, 1021 (1983).

The Kepples do not argue that the findings of fact made by the trial court did not arise from competent evidence. Indeed, an examination of the record indicates that they are supported by facts of record. The Kepples argue instead that the trial court should have included certain findings of fact which would have tended to prove their estoppel argument. Pennsylvania Rule of Civil Procedure 1516 states in part that "[n]o requests for findings of fact and conclusions of law may be submitted except by leave of court. The requests may be treated by the court as suggestions." Pa.R.Civ.P. 1516 (emphasis added). The clear language of the rule states that proposed findings of fact may be treated as suggestions by the trial court. The trial court in this case decided not to accept the findings of fact as offered by the Kepples, and found no need to include findings concerning "the actions of Peoples [Natural Gas] vis-a-vis the owners, the Peoples [Natural Gas] and Fairman title reports, Fairman's actions under the Drilling Agreement, the Fairman payments to Kepple[,] and the Kepple title report," because it had determined that estoppel was not an issue in the case.

The decision not to accept the Kepples' proposed findings of fact was well within the discretion of the trial court. A mere error of judgment does not rise to abuse of discretion; it is only where the trial court, in reaching its conclusion, has overridden or misapplied the law, or where the judgment is manifestly unreasonable, or the result of prejudice, partiality, bias, or ill will illustrated by the record, that it will be found to have abused its discretion. In re Estate of Cornell, 336 Pa.Super. 594, 596-97, 486 A.2d 424, 425 (1985), rev'd on other grounds, 511 Pa. 475, 515 A.2d 555 (1986). That is not the case here. It was perfectly reasonable for the court to eliminate facts it found were not pertinent to the disposition of the case. The trial court could only have abused its discretion if it misapplied the law, and the doctrine of estoppel was in fact applicable.

This is, in effect, what the Kepples argue to us in all the issues they present to us for appeal. Because we agree with the trial court that an estoppel argument was inapplicable in this case, we find that the trial court committed no error of law in excluding those facts which, ostensibly, would have tended to prove that argument.

The Kepples argue that the trial court erred in finding the doctrine of estoppel arising out of landlord/tenant law inapplicable in this case. The trial court held that the Kepples' promise to convey full interest in the oil and gas rights appurtenant to their property was consideration for Fairman's promise to pay a full one-eighth royalty to them. The court then held that that consideration had failed because of the prior existing lease from the Burkleys to Peoples Natural Gas. Therefore, Fairman was excused from the promise to pay the full royalty. The Kepples contend that Fairman should not have been permitted to raise the invalidity of the oil and gas lease based on the prior lease because Fairman, as a tenant, was estopped from questioning the title of its landlords, the Kepples. They argue that principles of landlord/tenant law should apply to a situation involving an oil and gas lease and cite Silvis v. Peoples Natural Gas Co., 386 Pa. 453, 126 A.2d 706 (1956), Hamilton v. Pittock, 158 Pa. 457, 27 A. 1079 (1893), Babcock Lumber Company v. Allison, 136 Pa.Super....